BETWEEN THE LINES: More Billionaires, More Bankruptcies
Despite the current "boom times" that have been described by some as America's longest period of economic expansion, a growing number of economists and activist organizations are pointing out the growing gap between rich and poor in the U.S.In a new report issued by the Boston-based United for a Fair Economy titled, "Divided Decade: Economic Disparity at the Century's Turn," the group points out the widening gulf between the haves and the have nots in the U.S. Among the disturbing statistics cited in this report: although the stock market continues to go through the roof, the average American household has lost ground, with inflation-adjusted net worth declining from $54,000 in 1989 to $49,000 in 1997. According to the report, the top 1 percent of households have more wealth than the entire bottom 95 percent combined. The 400 richest Americans, together, are worth more than $1 trillion -- about one-ninth of the total gross domestic product (GDP) of the United States, the worldâs richest economy. These 400 have about as much wealth as the 50 million households in the bottom half of the population.Bill Gates is a microcosm of the wealth gap, the report says. In 1990, he was worth $2.5 billion, about the same as the gross national product (GNP) of Nicaragua. By 1999, he was worth $85 billion, about the combined sum of the GNPs of Nicaragua and all the other countries of Central America -- Guatemala, El Salvador, Panama, Costa Rica, Honduras and Belize -- plus the Dominican Republic, Haiti, Jamaica and Bolivia.Between The Lines' Scott Harris spoke with Chuck Collins, co-director of United for a Fair Economy, who summarizes his group's report and offers some policy recommendations to build a more equitable and inclusive economy.Chuck Collins: We found that we are a much more unequal nation at the end of the 1990s than we were at the beginning of the decade. Essentially, it's a really startling contrast to go and look back at the 30 years after World War II -- 1947-1977. During that period, every fifth of society, from the lowest-income fifth to the highest-income fifth -- people of color, whites -- everybody saw their incomes double over that 30-year period.In the last 25 years, there's been this dramatic pulling apart, where the top fifth has really taken off on a rocket launcher, seeing their incomes rapidly accelerate, whereas the middle class and people in the bottom fifth have pretty much stood still or actually seen their real incomes go down.If I were to summarize the last decade, it would be that there are more billionaires, there are more children in poverty, there's more bankruptcies, and there's a precariousness to this prosperity that we're all hearing so much about, because it's largely based on middle income people going deeper into debt to purchase things, to maintain a standard of living. It's not based on real wage growth, it's based on debt and working more hours. And that's not a formula for long term, sustainable, economic growth.Over the last 10 years, consumer debt tripled, primarily credit card debt. The number of households that don't have health insurance went up 33 percent. The number of bankruptcies doubled. And at the top end, the (net worth) of the Forbes 400 went up about 285 percent. The stock market over a ten-year period went up 335 percent.So, it's a very good economy if you own a lot of assets. Not a particularly good economy, if your security comes from a paycheck.Between The Lines: Chuck Collins, how do you explain some of the commentary on the news and business pages where consumer confidence is said to be at an all-time high, where Bill Clinton weathered the storm of the scandals of his presidency by and large, analysts say, because the economy was "so strong." How do you explain the gulf between public perception and the reality that many people are struggling just to stay in place?Chuck Collins: Oh, I think that for the very top fifth, and really the top 40 percent of the population, this is the Golden Age, this is a wonderful time. People are watching their assets multiply, their home equity blossom. And then I think what I would describe as consumer confidence for people in the middle 30-40 percent is a little more elusive, meaning, I think that since a lot of it is built on debt -- people are borrowing based on tomorrow's earning potential and are feeling good, but I think it would not take a tremendous bump in the road to dramatically shift how people feel.I can envision -- and this is a scenario that everyday you can see in the Wall Street Journal -- the market seizes up a little bit, the high-tech stocks take a major plunge. High-tech stock is really what's propping up the economy, creating this enormous paper wealth. But if the bubble bursts all of a sudden, consumer spending dries up and people start losing their jobs, then all of a sudden people wake up and find that they have $7,000 of credit card debt and $20,000 of consumer debt -- and they don't have a plan to repay it. So I think there's a certain amount of denial in the larger culture and the economy about the house-of-cards basis about this "prosperity."Between The Lines: As we conclude, I would like to you to give some of the vital planks of your group's platform over at United for a Fair Economy. What really are the core things that have to change in this country to reverse the direction of growing income inequality?Chuck Collins: Well, we believe that anybody who works full time should not be in poverty. That the minimum wage should be a living wage. We think it's important to close the wage gap in this country, to eliminate the deductibility of excessive compensation -- where right now, the taxpayer allows corporations to deduct excessive pay packages; we favor a cap on that. We think the tax code shouldn't favor asset owners at the expense of wage earners. That we shouldn't tax income from work at a higher rate than we do income from investments, which is currently the situation.We think we should be looking at how we reduce the wealth gap, the asset gap. As a country, we have historically taken some bold action to help individuals build wealth. But we also, I think, have to look at the dangers of an over concentration of wealth and power. Having too much wealth in too few hands distorts the economy and ultimately leads to a breakdown in our culture and democracy.Contact United for a Fair Economy by calling their toll free number, 1-877-JOINUFE or by visiting their Web site at http://www.stw.org.